barth - the rise and fall of the u.s. mortgage and credit markets (2009)

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The Rise and Fall of
the U.S. Mortgage
and Credit Markets
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The Rise and Fall of
the U.S. Mortgage
and Credit Markets
A Comprehensive Analysis
of the Market Meltdown
James R. Barth
Tong Li
Wenling Lu
Triphon Phumiwasana
Glenn Yago
John Wiley & Sons, Inc.
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Copyright
C


2009 by The Milken Institute. All rights reserved.
Published by John Wiley & Sons, Inc., Hoboken, New Jersey.
Published simultaneously in Canada.
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ISBN 978-0-470-47724-3
Printed in the United States of America.

10987654321
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For
Rachel, Yiping and Keneng, Mei Yun and Sheng Fu,
Valaiporn, and Stephanie
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Contents
List of Illustrations xi
List of Tables xxv
Acknowledgments xxxiii
Chapter 1 Overleveraged, from Main Street to
Wall Street 1
Chapter 2 Overview of the Housing and Mortgage
Markets 9
Housing Units, Mortgage Debt, and
Household Wealth 9
Types of Home Mortgages 15
Two Housing Finance Models:
Originate-to-Hold vs.
Originate-to-Distribute 22
Low Interest Rates Contribute to Credit Boom
and Record Homeownership Rates 29
Mortgage Originations, Home Prices, and

Sales Skyrocket 36
Chapter 3 Buildup and Meltdown of the Mortgage
and Credit Markets 41
What Is a Subprime Mortgage and Who Is a
Subprime Borrower? 42
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viii CONTENTS
Subprime Lending Grows Rapidly and New
Products Gain Acceptance 46
Subprime Mortgages Enable More
Widespread Homeownership 56
Securitization Facilitates the Funding of
Subprime Mortgages 61
The Housing Bubble Reaches the
Breaking Point 65
The Collapse Begins 74
Chapter 4 When Will the Crisis End? 101
What Is the Damage Scorecard to Date? 102
The Pain Spreads throughout the Financial
Sector and Beyond 112
When Will We Hit Bottom? 135
Chapter 5 What Went Wrong ? 143
with Origination Practices and
New Financial Products? 145
with Securitization and Rating Agencies? 153
with Leverage and Accounting Practices? 160
with Fannie Mae and Freddie Mac? 172
with Tax Benefits for Homeownership? 182

with Regulation and Supervision? 184
with the Greed Factor? 204
Assessing the Role of Various Factors
to Explain Foreclosures 207
Chapter 6 So Far, Only Piecemeal Fixes 219
The Landscape Shifts for Lenders 220
The Federal Reserve Intervenes to Provide
Liquidity and Higher-Quality Collateral 231
Congress and the White House Take Steps to
Contain the Damage 249
The FDIC Takes Steps to Instill Greater
Confidence in Depository Institutions 269
The Government’s Actions Drive up the
Deficit 274
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Contents ix
Chapter 7 Where Should We Go from Here? 287
Key Factors That Should Drive Reform 289
Issues for Policymakers 293
Concluding Thoughts 319
Appendix 321
Endnotes 445
Glossary 451
References 479
About the Milken Institute and General Disclaimer 507
About the Authors 509
Index 513
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List of Illustrations
Figure 2.1 Three of Five Housing Units Are Owner
Occupied (Q3 2008) 10
Figure 2.2 Mortgage Debt Enables Homeownership and
Leads to Wealth Accumulation (Quarterly,
1952–Q2 2008) 11
Figure 2.3 In 2008, Mortgage Debt Accounts for More
than 50 Percent of the Value of Housing Stock
(Quarterly, 1952–Q2 2008) 12
Figure 2.4 Value of Housing Units: How Much Has Been
Borrowed, Who Are the Borrowers, and Who
Funds Them? (Q2 2008) 13
Figure 2.5 Sources of Funding for Residential and
Commercial Mortgages (Q2 2008) 14
Figure 2.6 Types of Loans Available in the Home
Mortgage Market 15
Figure 2.7 Conventional and Government Home
Mortgage Originations (Selected Years) 17
Figure 2.8 Conventional and Government Home
Mortgages Outstanding (Selected Years) 18
Figure 2.9 Originations of Conventional and Government
ARMs (Selected Years) 19
Figure 2.10 Conventional and Government ARMs
Outstanding (Selected Years) 20
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xii LIST OF ILLUSTRATIONS
Figure 2.11 Subprime and Alt-A Shares of Mortgage
Originations Spike between 2001 and 2006 and
Then Fall (Selected Years) 21
Figure 2.12 Types and Purposes of Loans Available in the
Home Mortgage Market 22
Figure 2.13 Changing Funding Sources for Home
Mortgages (Selected Years) 23
Figure 2.14 The Mortgage Model Switches from
Originate-to-Hold to Originate-to-Distribute
(Selected Years) 24
Figure 2.15 By 2006, Mortgage Brokers Accounted for a
Majority of Home Mortgage Originations
(Selected Years) 25
Figure 2.16 Share of Private-Label Mortgage Issuance
Increases by 36 Percentage Points in Two
Decades 26
Figure 2.17 Private-Label Mortgage Issuers Account for a
Larger Share of Outstanding Home Mortgage
Securities (Selected Years) 27
Figure 2.18 Guarantees of Asset-Backed Securities by
Monoline Insurers Dominate Those for
Municipal Securities (December 2006) 28
Figure 2.19 Growth and Shares of Outstanding Securities
Backed by Various Assets (Selected Years) 29
Figure 2.20 Did the Fed Lower Interest Rates Too Much
and for Too Long? Federal Funds Rate vs.
Rates on FRMs and ARMs (Weekly, January
1991–November 1, 2008) 31
Figure 2.21 The United States Is the Largest Importer of

Capital (2007) 32
Figure 2.22 Capital Inflows to the United States
(1983–2007) 32
Figure 2.23 On a Roughly Similar But Inverse Track:
ARM Share of Total Mortgage Applications
and the One-Year ARM Rate (Weekly,
1990–November 3, 2008) 33
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List of Illustrations xiii
Figure 2.24 Credit Boom Pushes Homeownership Rate to
Historic High (Quarterly, 1965–Q3 2008) 35
Figure 2.25 Rental Rate Hits an All-Time Low in 2004
(Quarterly, 1965–Q3 2008) 35
Figure 2.26 Low Interest Rates and Credit Boom
(1994–Q3 2008) 36
Figure 2.27 Home Price Bubble and Credit Boom
(1994–Q3 2008) 37
Figure 2.28 Home Price Bubble and Homeownership
Climb (1990–Q2 2008) 38
Figure 2.29 Home Price Bubble Peaks in 2006
(Monthly, January 1987–September 2008) 39
Figure 2.30 Home Sales Peaked in Fall 2005, Then
Plummeted (Monthly, 1968–September 2008) 39
Figure 3.1 National FICO Scores Display Wide
Distribution 43
Figure 3.2 What Goes into a FICO Score? 44
Figure 3.3 Prime and Subprime Mortgage Originations by
Borrower FICO Score Reveal Substantial
Overlaps (2006) 45

Figure 3.4 Subprime Home Mortgage Originations
Increase Rapidly before Big Decline
(2001–Q3 2008) 47
Figure 3.5 Subprime Home Mortgages Outstanding
Increase Rapidly before Big Decline
(1995–Q2 2008) 47
Figure 3.6 Subprimes Take an Increasing Share of All
Home Mortgage Originations (2001–Q3 2008) 49
Figure 3.7 Subprime Share of Home Mortgages Grows
Rapidly before Big Decline (1995–Q2 2008) 50
Figure 3.8 ARM Share Grows, Following Low Interest
Rates (Quarterly, 2001–Q2 2008) 53
Figure 3.9 Largest Share of ARMs Go to Subprime
Borrowers (Quarterly, 2001–Q2 2008) 54
Figure 3.10 Hybrids Dominate Subprime Home Purchase
Loan Originations (2006) 54
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Figure 3.11 Securitization Becomes the Dominant
Funding Source for Subprime Mortgages
(1994–Q3 2008) 61
Figure 3.12 Private-Label Mortgage-Backed Security
Issuance Dries up in 2008 64
Figure 3.13 The Recent Run-up of Nominal Home Prices
Was Extraordinary (1890–Q2 2008) 67
Figure 3.14 Home Prices Don’t Go up Forever: Change in
Nominal Home Prices in 100-Plus Years
(1890–Q2 2008) 68
Figure 3.15 The Recent Run-up of Real Home Prices Was

Extraordinary (1890–Q2 2008) 68
Figure 3.16 Home Prices Don’t Go up Forever:
Change in Real Home Prices in 100-Plus Years
(1890–Q2 2008) 69
Figure 3.17 Nominal Returns on Selected Assets
(1890–2007) 71
Figure 3.18 California and National Median
Home Prices Reach Record Highs
(Monthly, January 1979–September 2008) 71
Figure 3.19 Ratio of Median Home Price to Median
Household Income Increases Rapidly
(1968–2007) 72
Figure 3.20 Rent–Price Ratio Reached Historic Low in
2006 But Has Slightly Rebounded
(Quarterly, 1960–Q1 2008) 73
Figure 3.21 Recent Jump in Homes for Sale: Existing and
New Homes (Monthly, 1989–September 2008) 74
Figure 3.22 2005: The Collapse in Home Prices Begins
(Quarterly, Q1 1988–Q2 2008) 75
Figure 3.23 Timeline for the Subprime Mortgage Market
Meltdown and Credit Market Freeze
(December 2006–October 31, 2008) 76
Figure 3.24 Liquidity Freeze: Spread between
Three-Month LIBOR and Overnight Index
Swap Rates (Weekly, 2001–October 31, 2008) 77
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Figure 3.25 Widening TED Spread: Spread between
Three-Month LIBOR and T-Bill Rates

(Daily, December 31, 2005–October 31, 2008) 78
Figure 3.26 Market for Liquidity Freezes
(Daily, May 1, 2007–October 31, 2008) 78
Figure 3.27 Median Existing Home Price: Too Good to
Last (Monthly, 1969–August 2008) 79
Figure 3.28 Forty-Six States Report Falling Prices in
Q4 2007 80
Figure 3.29 One-Year Home Price Changes for Selected
Metropolitan Areas (August 2007–August 2008) 81
Figure 3.30 Two-Year Home Price Changes for Selected
Metropolitan Areas (August 2006–August 2008) 81
Figure 3.31 Four-Year Home Price Changes for Selected
Metropolitan Areas (August 2004–August 2008) 82
Figure 3.32 Five-Year Home Price Changes for Selected
Metropolitan Areas (August 2003–August 2008) 82
Figure 3.33 Housing Starts Hit Record in 2006
But Then Drop 64 Percent
(Monthly, 1959–September 2008) 83
Figure 3.34 Private Construction Spending on Residential
Property Declines since the Peak of 2006
(Monthly, 1993–September 2008) 84
Figure 3.35 Existing Home Sales Are Down Everywhere
over the Past Two Years (Percentage Change,
Q4 2005–Q4 2007) 85
Figure 3.36 Homes Sit Longer on the Market
(Monthly, 1989–September 2008) 85
Figure 3.37 Homes Stay Longer on the Market
as Home Appreciation Slows
(Monthly, 1989–September 2008) 86
Figure 3.38 Percentage of Homes Purchased between 2001

and 2006 That Now Have Negative Equity 87
Figure 3.39 Percentage of Homes Sold at a Loss between
Q3 2007 and Q2 2008 88
Figure 3.40 Percentage of Homes Sold between Q3 2007
and Q2 2008 That Were in Foreclosure 89
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xvi LIST OF ILLUSTRATIONS
Figure 3.41 Subprime Delinquencies Skyrocket
(Quarterly, 1998–Q2 2008) 90
Figure 3.42 Subprime Mortgages Entering Foreclosure
Take off (Quarterly, 1998–Q2 2008) 90
Figure 3.43 Subprime ARMs Have the Worst Default
Record (Quarterly, Q2 1998–Q2 2008) 91
Figure 3.44 Foreclosures Are Nothing New
But Their Numbers Have Doubled
(Quarterly, Q2 1999–Q2 2008) 91
Figure 3.45 Subprime Loans Accounted for Half or More
of Foreclosures since 2006 92
Figure 3.46 Early Problems: Foreclosure Rates of Subprime
Loans by Origination Year (1998–2006) 94
Figure 3.47 Dow Jones Industrial Average Index
(Daily, 1910–October 31, 2008) 95
Figure 3.48 Dow Jones Industrial Average Index
(Daily, 1910–October 31, 2008) 96
Figure 4.1 Losses/Write-Downs, Capital Raised, and Jobs
Cut by Financial Institutions Worldwide
through October 31, 2008 106
Figure 4.2 Cumulative Losses/Write-Downs, Capital
Raised, and Jobs Cut by Financial Institutions

Worldwide through October 31, 2008 107
Figure 4.3 Worldwide Capital Raised by Source
( July 2007–July 2008) 107
Figure 4.4 Worldwide Capital Raised by Type of
Instrument ( July 2007–August 2008) 108
Figure 4.5 Financial Stock Prices Take Big Hits 110
Figure 4.6 Financial Market Capitalization Takes Big Hit 110
Figure 4.7 Sign of Collapse: Widening Spreads between
Mortgage-Backed and High-Yield Bonds
(Weekly, 2004–October 31, 2008) 113
Figure 4.8 Yield Spreads: Corporate Bonds vs. Treasury
Securities (2007–October 31, 2008) 114
Figure 4.9 Widening Spreads between Municipal Bonds
and 10-Year Treasury Bonds
(Weekly, 1970–October 24, 2008) 115
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Figure 4.10 Commercial Paper Outstanding
Declines Substantially
(Weekly, January 4, 2006–October 29, 2008) 116
Figure 4.11 Market for Liquidity Freezes up:
Changes in Commercial Paper Outstanding
(Weekly, January 4, 2006–October 29, 2008) 116
Figure 4.12 Money Market Funds Suffer Withdrawals 117
Figure 4.13 Counterparty Risk Increases for Financial
Firms (Daily, July 2007–October 31, 2008) 119
Figure 4.14 Jump in GSE Credit Default Swap Spreads
over Treasury Securities Finally Initiates
Government Support

(Daily, January 2008–October 31, 2008) 120
Figure 4.15 Average Three-Month Rolling Correlations of
Daily Credit Default Swap Premiums of 18
U.S. Industries 125
Figure 4.16 Average Six-Month Rolling Correlations of
Daily Credit Default Swap Premiums of 18
U.S. Industries 125
Figure 4.17 Average One-Year Rolling Correlations of
Daily Credit Default Swap Premiums of 18
U.S. Industries 126
Figure 4.18 Rising Risk: The Credit Default Swap Market
Nearly Doubled Each Year from June 2001
through October 2008 126
Figure 4.19 Estimated Breakdown of Credit Default Swap
Buyers and Sellers of Protection (March 2007) 128
Figure 4.20 Breakdown of Notional Amount of Credit
Derivatives of All U.S. Banks by Investment
Grade and Maturity ( June 2008) 129
Figure 4.21 CDS Premiums Rise Dramatically
for G7 in October 2008
(Weekly, January 4, 2008–October 31, 2008) 134
Figure 4.22 CDS Premiums Rise Dramatically for
Emerging Economies in October 2008
(Weekly, January 4, 2008–October 31, 2008) 134
Figure 4.23 Looking for a Bottom: Survey of Economists 135
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xviii LIST OF ILLUSTRATIONS
Figure 4.24 Home Mortgage Debt Share of Household
Debt Reaches a New High in 2007

(Quarterly, 1952–Q2 2008) 138
Figure 4.25 Home Mortgage Debt as a Percentage of
Disposable Personal Income Reaches a High in
2007 (Quarterly, 1952–2007) 139
Figure 4.26 Implied Annualized Price Decline through
Expiration Date of Chicago Mercantile
Exchange Home Price Futures Contracts 139
Figure 4.27 Stock Market Volatility Reaches Record High
(Daily, January 1, 1990–October 31, 2008) 141
Figure 5.1 The Mortgage Problem in Perspective
(Mid-2008) 144
Figure 5.2 Prime Mortgage Originations
( January 1999–July 2007) 147
Figure 5.3 Subprime Mortgage Originations
( January 1999–July 2007) 147
Figure 5.4 Cumulative Foreclosures through September
2007 on Prime Mortgages Originated
January 1999 through July 2007 148
Figure 5.5 Cumulative Foreclosures through September
2007 on Subprime Mortgages Originated
January 1999 through July 2007 149
Figure 5.6 Mortgage Originations: Loan-to-Value (LTV)
Ratio (2006) 150
Figure 5.7 Mortgage Originations: Documentation (2006) 151
Figure 5.8 There Are Better Ways to Disclose Information
about Home Mortgage Loans 153
Figure 5.9 When Is a AAA Not a AAA? Multilayered
Mortgage Products Create New and Higher
Ratings 157
Figure 5.10 Downgrades in the Asset-Backed Securities

Markets 158
Figure 5.11 Subprime Mortgage-Backed Securities
Downgrades (2005–2007 Issuance) 159
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Figure 5.12 The Growth in Mortgage-Backed Securities
Has Contributed to the Rise of Structured
Finance Collateral in Collateralized Debt
Obligations (Quarterly CDO Issuance,
2005–Q3 2008) 161
Figure 5.13 Leverage Ratios of Different Types of Financial
Firms ( June 2008) 163
Figure 5.14 Selected Financial Institutions’ Leverage Ratios
(Selected Years) 163
Figure 5.15 Increased Leverage Leads to Slight Decrease in
Issuer Rating 165
Figure 5.16 Selected Financial Institutions’ Market-to-Book
Ratios (Selected Years) 165
Figure 5.17 Capital–Asset Ratio for Commercial Banks
Shows Long-Term Decline (1896–Q2 2008) 167
Figure 5.18 Leverage Ratio for Commercial Banks Shows
Long-Term Increase (1896–Q2 2008) 167
Figure 5.19 Selected Balance Sheet Items for All
Commercial Banks (Quarterly, 1994–Q2 2008) 168
Figure 5.20 The Growing Role of Agencies and
Government-Sponsored Enterprises (GSEs) in
Funding Home Mortgages (Selected Years) 175
Figure 5.21 The Importance of Fannie Mae and Freddie
Mac vs. Commercial Banks and Savings

Institutions in the Residential Real Estate
Market (Q2 2008) 176
Figure 5.22 Fannie Mae and Freddie Mac’s Growth
since 1990 176
Figure 5.23 Capital Ratios for Fannie Mae and Freddie Mac
(2005–Q3 2008) 177
Figure 5.24 Fannie Mae and Freddie Mac Are Highly
Leveraged (2005–Q3 2008) 177
Figure 5.25 Reported Earnings of Fannie Mae and Freddie
Mac (Quarterly, 2006–Q3 2008) 178
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Figure 5.26 Characteristics of Mortgage Loans and
Mortgage-Related Securities in Freddie Mac’s
and Fannie Mae’s Retained Portfolios
(Selected Years) 180
Figure 5.27 Characteristics of Mortgage Loans and
Mortgage-Related Securities in Freddie Mac’s
and Fannie Mae’s Retained Private-Label
Portfolios (Selected Years) 180
Figure 5.28 Freddie Mac’s Guaranteed PCs and Structured
Securities by Single-Family Conventional
Mortgage Products (2005–2007) 181
Figure 5.29 Foreign Share of Purchases of Newly Issued
GSE Debt Declines Abruptly in August 2008 182
Figure 5.30 Estimated Tax Savings by Individuals Due to
Mortgage Interest Deduction on
Owner-Occupied Homes 186
Figure 5.31 Alternative Measures of the Affordability

of Mortgage Debt Nationwide
(Quarterly, Q2 1972–Q4 2007) 193
Figure 5.32 Alternative Measures of the Affordability
of Mortgage Debt for California
(Quarterly, Q2 1979–Q1 2008) 194
Figure 5.33 Reserve Coverage Ratio of All FDIC-Insured
Institutions 195
Figure 5.34 Outstanding Federal Home Loan Bank
Advances Held by FDIC-Insured Institutions
(1991–Q2 2008) 197
Figure 5.35 Ratio of Outstanding Federal Home Loan
Bank Advances to FDIC-Insured Institution
Assets (1991–Q2 2008) 198
Figure 5.36 Outstanding Brokered Deposits
(1992–June 2008) 198
Figure 5.37 Outstanding Brokered Deposits to
FDIC-Insured Institution Assets
(1992–June 2008) 199
Figure 5.38 Investor Share of Second Home Purchases
(Selected Years) 206
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Figure 5.39 Drivers of Foreclosures: Strong Appreciation or
Weak Economies? 208
Figure 5.40 After the Housing Bubble Burst in 2007:
Foreclosures Highest for Areas with Biggest
Price Declines 209
Figure 5.41 Default Rates of Subprime Home Mortgage
Loans and Year-over-Year Change in

Employment ( January 1998–September 2008) 211
Figure 5.42 Median Percentage Down Payment on Home
Purchases (Selected MSAs, 2006) 212
Figure 6.1 Tightened Standards and Weaker Demand
for Commercial Real Estate Loans
(Quarterly, 1990–Q3 2008) 220
Figure 6.2 Tightened Standards for Residential Mortgage
Loans (Quarterly, 1990–Q3 2008) 221
Figure 6.3 Weaker Demand for Residential Mortgage
Loans (Quarterly, 1990–Q3 2008) 221
Figure 6.4 Washington Mutual Reverses Its Mortgage
Origination Strategy 222
Figure 6.5 HOPE NOW Alliance Program:
Accumulated Borrower Repayment Plans
(Q3 2007–Q3 2008) 225
Figure 6.6 HOPE NOW Alliance Program: Accumulated
Borrower Modifications (Q3 2007–Q3 2008) 225
Figure 6.7 HOPE NOW Alliance Program: Accumulated
Borrower Workouts (Q3 2007–Q3 2008) 226
Figure 6.8 HOPE NOW Alliance Program: Accumulated
Foreclosure Sales (Q3 2007–Q3 2008) 226
Figure 6.9 Commercial Bank Lending Increases over Time
(Weekly, January 3, 1973–October 25, 2008) 227
Figure 6.10 Percentage Changes in Commercial Bank
Loans of Different Types over Time
(Weekly, January 3, 1973–October 25, 2008) 228
Figure 6.11 Changes in Commercial Bank Loans of
Different Types over Time
(Weekly, January 3, 2007–October 25, 2008) 229
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Figure 6.12 Net Borrowing by Households and
Nonfinancial Businesses
(Quarterly, Q1 1990–Q2 2008) 230
Figure 6.13 Excess Reserves Take Off
(Weekly, January 3, 2007–November 5, 2008) 231
Figure 6.14 Despite Federal Funds Rate Cuts,
Mortgage Rates Remain Relatively Flat
(Weekly, 2007–October 31, 2008) 233
Figure 6.15 Increasing Spreads between Corporate Bonds,
Mortgage Securities, and Target Federal Funds
Rate (Weekly, 2007–October 31, 2008) 233
Figure 6.16 Federal Reserve Assets Increased
But Asset Quality Deteriorated
(Weekly, January 5, 2000–November 26, 2008) 243
Figure 6.17 Negative Real Short-Term Interest Rates
(Monthly, January 2000–September 2008) 248
Figure 6.18 The Federal Reserve Has Little
Maneuvering Room
(Daily, June 1, 2008–November 14, 2008) 248
Figure 6.19 Spreads of Fannie Mae and Freddie Mac
Debt Yields over Treasury Rates Reaches
All-Time High
(Daily, January 1, 2008–November 19, 2008) 255
Figure 6.20 Number of FDIC-Insured “Problem”
Institutions 270
Figure 6.21 Assets of FDIC-Insured “Problem” Institutions 270
Figure 6.22 Federal Budget Surplus (Deficit)–to-GDP
Ratio (1976–September 2008) 274

Figure 6.23 Federal Public Debt–to-GDP Ratio
(1976– September 2008) 275
Figure 7.1 Origin of U.S. Banking Institutions and
Expanding Regulatory Role of Government 295
Figure 7.2 Most U.S. Banking Laws Are Responses
to Crises 296
Figure 7.3 Some U.S. Banking Laws Not Instituted as
Crisis Responses 296
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Figure 7.4 The Convoluted U.S. Financial Regulatory
Regime 299
Figure 7.5 Percentage of Deposits and Assets Held by Five
Largest Banks 304
Figure 7.6 Big Banks Increasingly Dominate U.S. Banking
Industry: Asset Shares by Bank Size 305
Figure 7.7 Citigroup’s Organizational Structure Is
Extremely Complex 305
Figure 7.8 Citigroup’s Product Complexity Challenges
Regulators and Its Internal Risk Managers 306
Figure 7.9 Foreign Ownership of Banks 307
Figure 7.10 Increasing Reliance on U.S. Securities Markets
for Capital Funding and Portfolio Investment
(1900–2008) 311
Figure 7.11 Surge in Amount and Diversity of U.S.
Asset-Backed Securities Outstanding 312
Figure 7.12 U.S. Asset-Backed Securities Outstanding 313
Figure 7.13 Shares of Consumer Credit: Banks Compared
to Pools of Securitized Consumer Assets 313

Figure 7.14 Five Big Banks Dominate in Derivatives
(Q2 2008) 315
Figure A.1 Origin of U.S. Banking Institutions and
Expanding Regulatory Role of Government 322
Figure A.2 Importance of Home Mortgages and
Securitization for Homeownership (1965–June
2008) 339
Figure A.3 Real Estate: An Important Component of
Household Wealth (Selected Years) 341
Figure A.4 Mortgage Brokerages Become Major Players in
Originating Home Mortgages (1987–2006) 351
Figure A.5 Mortgage Brokers Account for Majority of
Recent Home Mortgage Originations
(1987–2006) 351
Figure A.6 Surge in Amount and Diversity of Asset-Backed
Securities Outstanding (1999–Q2 2008) 352
Figure A.7 Foreign Share of Treasury Securities
Outstanding (1952–Q2 2008) 352